Select Committee on Treasury Minutes of Evidence

Annex A




  The British Chambers of Commerce (BCC) is the "National Voice of Local Business", representing 135,000 predominantly small firms that are members of Accredited Chambers of Commerce covering the whole of the UK.

  In response to a request from Nigel Griffiths, Under-Secretary of State for Small Business, dated 30 July 2001, we have collated the following examples of Chamber of Commerce members' views and experiences on public procurement.

  The BCC very much welcomes the Minister's commitment to look at this issue, so as to ensure that small businesses are able to compete for the opportunities offered by Government contracts. We hope that in pursuit of that objective this document is helpful.



  Small businesses share a general lack of knowledge about the procedures involved in bidding for public contracts and the skills required to do so.

  Access to information is a barrier. Whilst the information is available on the internet free of charge, it is so cumbersome to search the database that it requires expert skills. Fresh data is published each day and each tender notice only appears once. If the company does not see it, the application deadline will be missed. SMEs do not have the resources to search in detail daily.

  The language used in advertising tendering opportunities is often baffling and time-consuming to decipher, biasing the likely response towards larger firms.

  Contracts below £95,000 do not have to be advertised—the size of contracts that would attract a lot of small firms.

  Many SMEs would find a single contract of more than £95,000 prohibitive in cashflow terms and also in capacity, exposing them to risk by making them too dependent on a single, public sector customer. Linked to this, some small suppliers complain that some public sector buyers, particularly local authorities, are slow payers.

  Responding to tenders is very time-consuming. Financial and other data has to be gathered in every case to support the bid. There is no harmonisation of this requirement, so it must be gathered and re-shaped each time a tender is submitted. Short timescales will tend to favour existing suppliers.

  Legislation requires that when a contract is won, the notice of that award is posted. This is meant to allow smaller companies the opportunity of tracking the outcome and approaching the main contractor with a view to sub-contracting opportunities. In practice, this does not work as the main contractor will already have selected his sub-contractors and tied them to a price before submitting his bid.

  Buyers often stipulate very onerous financial requirements. For example, the provision of three or even five years' audited accounts. This instantly rules out new companies and works against central government's desire to relieve small companies of the need for an audit.

  Small firms find it difficult to provide the plethora of documents that public sector buyers often seek: financial information, method statements, risk assessments, health and safety policy, racial discrimination policy, disabled workers policy, quality assurance, insurance details, etc.

  It is sometimes difficult for a small company to ascertain who is the buyer, with several people within a public sector organisation having responsibility for different aspects of a purchase.

  There is aggregation of contracts at a national level that might be better offered locally. See appendix, example 11.

  Pre-qualification systems. Suppliers complain that some of these are relatively worthless, because buyers will still insist on the same documentation, as if they were applying from scratch. See appendix examples 1 and 2.

  Small suppliers get narked by the charges they incur to get on approved lists and other pre-qualification systems, particularly so, where the charges appear to exceed the administrative work required.

  There is a proliferation of standards. Small businesses find these costly to meet and obtain.

  The use of turnover thresholds automatically rules out some businesses.

  It is not always clear to suppliers how to get on approved supplier lists. If they are not reviewed regularly they could harm competition and stifle innovation.

  Purchasing skills. SME suppliers complain that some government buyers do not have the training to appreciate their circumstances, what they can do well and what will cause them problems.

  Unlimited liability clauses in contracts dissuade small suppliers from bidding.

  Suppliers state that they are often asked to provide product and professional liability insurance cover, with the amount insured far in excess of what would be normally regarded as prudent.

  Suppliers feel that buyers do not provide them with sufficient feedback on failed bids, which would improve their chances of successfully bidding for other contracts.

Ten suggested solutions

  1.  Training seminars. The Office of Government Commerce should run a series of local seminars through Chambers of Commerce to alert small businesses to the public procurement opportunities available and train them in the procedures involved in applying for contracts.

  2.  Tender alert services. The Bristol Chamber of Commerce's Tender Alert Service provides a good model that could be copied in other areas. It is based on the European Commission's network of official Euro Info Centres (EICs), which are recognised experts in supplying relevant tenders information on the day on which it is published, direct to SMEs. EICs have 10 years experience and charge a nominal fee for a very sophisticated service. This service needs to be more effectively promoted at Government level, via Chambers, the SBS and Business Links.

  3.  A central clearing house for alerting small businesses of contracts under £95,000 and sub-contracting opportunities. This could be based around a web site and intelligent e-mail alert service.

  4.  Replicate the joint bids service provided by the Cardiff Chamber of Commerce. The Chamber has set up networks of companies that are working together to put in bids, these are now beginning to deliver tangible benefits to the companies involved.

  5.  Make all public authorities consider an aggregation clause. Before advertising a contract public organisations should be required to attest that they have considered the issue of aggregation and where they pursue it should set out their reasoning for opting for central supply.

  6.  Research the effectiveness of using public procurement to pursue other policies. The Government should conduct and publish research on the effectiveness of using public procurement to pursue other policies, for example on discrimination issues and other employment rights.

  7.  Make greater use of output-based specifications. In contract information greater use should be made of output-based specifications, and less reliance placed on input-based standards.

  8.  Guidance on financial stipulations and alternative measures. The Office of Government Commerce should provide guidance and training on alternatives to the current common financial stipulation of having to provide three or five years' audited accounts.

  9.  Develop a standard format for the request of information from suppliers. This would be a tremendous simplification that would aid small businesses.

  10.  Guidance that illustrates best practice regarding pre-qualifying and approved lists. From our feedback there are clearly problems with both these methods of selecting suppliers. The Office of Government Commerce should provide guidance, which illustrates what is best practice.

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